Wall Street has $110B for homebuying spree

Blackstone, KKR among firms gearing up to purchase single-family rentals

From left: Blackstone's Stephen Schwarzman and KKR's Henry Kravis
From left: Blackstone's Stephen Schwarzman and KKR's Henry Kravis (KKR, Getty, Blackstone)

Wall Street has amassed a considerable war chest to take advantage of the shifting housing market.

Institutional investors have earmarked up to $110 billion to purchase or build single-family rentals, Insider reported. The estimate comes from Zelman & Associates, which hailed the amount as the most ever accumulated by investors to acquire U.S. homes. Of the $110 billion, $30 billion has already been committed to properties being leased or developed, a Zelman investment banker added.

The money is enough for roughly 400,000 homes. Institutional investors already own about 700,000. That is only 3 percent of the nation’s 20 million single-family rentals, according to Roofstock, but MetLife Investment Management predicts it will grow to 40 percent by 2030.

The players gearing up for a homebuying spree in the $4.4 trillion single-family rental market run the gamut, but include major names. Invitation Homes, Tricon Residential, Blackstone and KKR are among them, as are wealth managers and pension funds such as CalPERS and Invesco.

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Investors are looking for a better bet than their traditional property holdings, including office buildings, which are struggling. In addition to single-family rentals, they have been drawn to multifamily buildings and industrial assets.

Institutions pumped $50 billion into the single-family rental market during the first two years of the pandemic, John Burns Real Estate Consulting estimated. But the market has shifted in recent months as rising mortgage rates sidelined not only individuals but institutions.

Single-family rental transaction volume was down 70 percent year-over-year through November, according to an estimate by Adam Stern, the CEO of Strata SFR.

The housing market is presenting an opportunity for investors, though, as many individuals want to live in houses but don’t want to buy at the moment because prices and mortgage rates have jumped — or they expect to move in the near future.

Prices could decline in 2023 as more homes are listed for sale. Investors are also working with builders on built-to-rent communities, allowing investors to score deals and builders to ease inventory crunches.

Holden Walter-Warner